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Setting up new classes of shares in an existing company: companies often have one class of shares - ordinary shares that carry one vote each, full rights on winding up and full dividend rights. But some companies set up different share classes for various reasons; for example, you may want to separate capital rights, rights to profits and voting rights, pay dividends in a particular way, or provide shares to employees or family members. Different share classes can help you do this. If you'd like to set up new classes of shares in an existing company, we can help. At Coddan, we have extensive experience in all areas of company formation and corporate services, so we know exactly how to fill in the appropriate documentation and file it correctly, taking all the hassle out of your hands. Get in touch today to find out more.
|Creating Additional Classes of Company Shares|
A company may have different types of shares which will include various obligations and rights. The majority of companies will have only one class of shares identified as ordinary shares, nevertheless it is progressively more common for even very small private companies to have different share classes. There are numerous reasons for why this is so, for instance, a contributing factor is to be able to vary the dividends paid to different shareholders, in order to create non-voting shares, as well as shares for employees etc.
It can be tricky to understand where you stand with company shares, especially with a limited company. With different classes of shares and rules restricting their allocation, you need to be certain that everything is above board.
Limited companies are tightly regulated when it comes to shares, but they also offer many more options. A newly formed limited company may wish to offer shares to investors, or to reward those who helped the business grow in its early days. Knowing how different share classes work and how they can be allocated will ensure you do not end up in hot water down the line!
Coddan's financial and legal experts understand share allocation and how to manage it. You can outline your needs and requirements, and allow a specialist to take care of the details.
When changing a company's type and registering for limited status with Companies House, you pick up a new set of responsibilities regarding your shareholders. Understand how to keep everyone happy and how to build a successful new company, with the right people on board.
Issuing additional classes of shares can be a useful tool for any business, enabling you to provide shares for employees, for example, or to vary the level of dividend that you pay to different groups of shareholders, and there is a growing trend for businesses of all sizes to issue additional share classes.
It is important to remember, however, that there are strict legal requirements governing the issue of additional share classes. Many of these rules were updated by the Companies Act of 2006, which requires that the additional share issue must be agreed by all of the company directors, and by the existing shareholders, through the passing of a resolution. This resolution must also be notified to Companies House.
Handling the issue of additional share classes correctly is important in order to avoid any later legal challenge, so if you are unsure how to proceed, it can be a good idea to speak to a professional.
Traditionally, most companies that issue shares choose to offer only one kind of share, but there has been a trend in recent years for companies of all sizes to issue multiple classes of shares.
The ability to issue additional share classes has many advantages. It is a good way to give shares to employees or family members, it enables you to vary the level of dividend you pay to different groups of shareholders, and it can be used to create shares that don’t confer voting rights on the owners.
It is important to remember, however, that there are strict regulations on the issuing of additional share classes, and directors have a responsibility to keep Companies House informed. This can be a confusing legal area, so if you are unsure of how to proceed, it’s a good idea to talk to a reputable corporate services provider.
Issuing additional classes of shares was once the preserve of major corporations, but these days it is common for companies of all sizes to benefit from this useful method of structuring share composition.
An additional class of shares is not just a good way of generating extra investment, it can also enable a company to enact many important changes, such as rewarding employees, making it possible to vary the amount of dividend that is paid to different groups of shareholders, and raising money without giving away voting rights.
Companies that want to pursue this option should bear in mind, however, that the issuing of additional share classes is strictly regulated. Directors have to make sure the share issue is conducted correctly, and are obliged to keep Companies House up to date in a prompt and accurate manner.